UK economic outlook downgraded to 'negative' amid chaos after Liz Truss resigns

Ratings agency Moody's says the slowdown was due to political instability and high inflation following the resignation of Prime Minister Liz Truss in a report published last night

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Liz Truss announces her resignation as Prime Minister

The UK's economic outlook has gone from 'stable' to 'negative' in the chaos following the resignation of Liz Truss.

The report from ratings agency Moody's, released last night, said the change was due to political instability and high inflation.

He said he was motivated by "the heightened unpredictability of policy-making amid weaker growth prospects and high inflation" and "risks to debt affordability of the UK due to likely higher borrowing and the risk of a lasting weakening of political credibility".

Rating agencies rate a country on the strength of its economy and assign governments a rating based on the likelihood that they will be able to repay their debt.

Rating affects the cost to governments of borrowing money in international financial markets.

According to the agency, a forecast period "generally lasts 12 to 18 months".

However, while the UK's economic outlook has been described as "negative", Moody's credit rating for the UK remains unchanged at Aa3.

Prime Minister Liz Truss delivers her resignation speech in Downing Street (

Picture:

Getty Images)

The agency said the rating reflects the UK's economic resilience "despite the weakening of fiscal policy predictability in recent years".

He added: "The country's longstanding institutional framework remains strong and will continue to support the UK's ability to respond to shocks, as seen during the pandemic. In addition, the structure of the UK public debt, with a very long average maturity of around 15 years, as well as a strong domestic investor base add a degree of resilience to the credit profile in the face of shocks.

"The UK's national local and foreign currency caps remain unchanged at Aaa. The three-notch gap between the local currency cap and the sovereign rating is driven by the government's relatively small footprint in the UK. economy, a fairly robust external payments position and a diversified economy."